research-article

Beliefs, Shocks, and the Emergence of Roles in Asset Markets: An Agent-Based Modeling Approach

Authors:

Mohammad T Irfan,

Matthew J. BotschAuthors Info & Claims

AAMAS '24: Proceedings of the 23rd International Conference on Autonomous Agents and Multiagent Systems

Pages 40 - 48

Published: 06 May 2024 Publication History

Abstract

Although predictive AI models have grown to dominate computational finance, they are often limited in their applications when it comes to studying interventions and explaining behavioral outcomes. Financial economics, on the other hand, has a rich history of analytical approaches to asset-pricing theory, often requiring sweeping assumptions. In this paper, we construct an agent-based model of asset markets that is able to dispense with onerous restrictions on agent behaviors and beliefs, while having analytical validity and providing insights into the functioning of asset markets. In particular, we evaluate our models with respect to several traditional financial economic theories like Tobin's separation theorem and the capital asset pricing model (CAPM). We devise a network representing trades to show the emergence of different roles played by the agents. We study interventions, such as shocks, and explain the outcomes using our model. Finally, we investigate the effects of noise trading and show that noisy agents converge to different equilibrium points due to their differences in beliefs. Put together, this paper presents an agent-based model that can be used to study the effects of heterogeneous beliefs and risks of the agents and shocks to assets at a systemic level, thereby connecting localized agent and asset characteristics to global or collective outcomes.

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Cited By

Brusatin SPadoan TColetta ADelli Gatti DGlielmo A(2024)Simulating the Economic Impact of Rationality through Reinforcement Learning and Agent-Based ModellingProceedings of the 5th ACM International Conference on AI in Finance10.1145/3677052.3698621(159-167)Online publication date: 14-Nov-2024
https://dl.acm.org/doi/10.1145/3677052.3698621

Index Terms

Beliefs, Shocks, and the Emergence of Roles in Asset Markets: An Agent-Based Modeling Approach
1. Computing methodologies
  1. Artificial intelligence
    1. Distributed artificial intelligence
      1. Multi-agent systems
  2. Modeling and simulation
    1. Simulation types and techniques
      1. Agent / discrete models

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Information

Published In

AAMAS '24: Proceedings of the 23rd International Conference on Autonomous Agents and Multiagent Systems

May 2024

2898 pages

ISBN:9798400704864

General Chairs:
Mehdi Dastani
Utrecht University, Netherlands
,
Jaime Simão Sichman
University of São Paulo, Brazil
,
Program Chairs:
Natasha Alechina
Utrecht University, Netherlands
,
Virginia Dignum
Umeå University, Sweden

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International Foundation for Autonomous Agents and Multiagent Systems

Richland, SC

Publication History

Published: 06 May 2024

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AAMAS '24

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SIGAI

AAMAS '24: International Conference on Autonomous Agents and Multiagent Systems

May 6 - 10, 2024

Auckland, New Zealand

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Overall Acceptance Rate 1,155 of 5,036 submissions, 23%

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Cited By

Brusatin SPadoan TColetta ADelli Gatti DGlielmo A(2024)Simulating the Economic Impact of Rationality through Reinforcement Learning and Agent-Based ModellingProceedings of the 5th ACM International Conference on AI in Finance10.1145/3677052.3698621(159-167)Online publication date: 14-Nov-2024
https://dl.acm.org/doi/10.1145/3677052.3698621

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